South Africa: Tobacco Rivals in Smoke-Off

Source from:  Business Day (Johannesburg) 6 August 2007 08/07/2007

CLAIMS that British American Tobacco SA (Batsa ) has used its 90% market share to give its brands prominence over rival Japan Tobacco International (JTI) products will be heard by the Competition Tribunal today. JTI and Batsa are due to fight it out over who should be entitled to more display space in court for two weeks this month, and another two weeks in January. But with at least 50 witness statements, the matter is not likely to be finalised in the allotted time. Webber Wentzel Bowens, for JTI, intends calling witnesses ranging from Batsa employees to vending machine operators and economists. JTI first filed a complaint against its rival in 2003. Webber Wentzel Bowens partner Martin Versfeld said the case hinged on the extent to which a dominant party could engage in merchandising practices to reduce the visibility of competitors' products. In October 2003, JTI lodged a complaint with the Competition Commission, which investigated the allegations the next year. The commission referred aspects of the complaint, agreements and incentive schemes to the tribunal in February 2005. In June 2005, JTI also claimed Batsa had vertical relationships with retail outlets. Batsa, with 90% of the local market, allegedly ensured prominence of its brands through practices including exclusivity arrangements and incentive schemes. Versfeld said the incentive schemes ranged from a quarterly cash payout to a rewards programme allowing retailers to earn enough points to acquire electronic equipment. JTI, which has 4,7% of the market, is the second-largest player, followed by Phillip Morris at about 1% and a handful of smaller companies. Versfeld said it contended merchandising space should be allocated according to brand popularity and sales within outlets. Batsa's legal director, Salim Young, denied the company abused its market dominance. He said its "leading position" meant the responsibility of always complying with the law and operating ethically. Batsa was SA's leading tobacco group because "of strong brands and a good understanding of consumers' needs and preferences" and not abuse of its position, said Young. The company would be "vigorously" defending itself against the allegations, which it emphatically denied, said Young. Enditem